Swiss query tax evasion rules

Switzerland’s justice minister yesterday questioned whether tax evasion should continue to be treated as a misdemeanour rather than a crime, in another blow to the country’s cherished banking secrecy.

Switzerland has already abandoned the distinction between tax evasion -- failing to declare your income or wealth to the taxman -- and tax fraud -- deliberately misleading the revenue -- for foreigners investing money in the country.

Last year Switzerland was forced to help the US authorities investigate tax evasion by thousands of Americans investing in Switzerland to resolve a case brought by the US authorities against UBS. That lawsuit threatened to bring down the giant Swiss bank with disastrous results for the Swiss economy.

Switzerland has also been forced to renegotiate double-taxation agreements with other countries that recognise tax evasion as a crime not protected by banking secrecy, under sustained pressure from Germany and other European states.

Swiss tax authorities should be treated in the same way as foreign ones, Justice Minister Eveline Widmer-Schlumpf said in an interview with the weekly NZZ am Sonntag. “The question arises whether in the long term we should abolish the distinction between tax fraud and serious cases of tax evasion domestically as well,” she was quoted as saying.

The independent-minded Swiss, with a centuries-old suspicion of government, believe that an individual’s financial affairs are his or her own business. While consciously lying to the revenue authorities is a crime as elsewhere, simply omitting to report earnings is currently an administrative offence punishable by a fine.